SMM Morning Comments (Apr 27): Base Metals Closed Mostly with Losses on Further Signs of Economic Slowdown

SHANGHAI, Apr 27 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the U.S. dollar retreated yesterday on fresh signs of a U.S. economic slowdown after data showed core capital goods orders fell more than expected in March, while Europe's economic outlook may move upwards unexpectedly, driving the euro stronger.

Copper: LME copper prices closed at $8,529/mt overnight. Trading volumes were 22,000 lots and open interest stood at 256,000 lots. SHFE 2306 copper contract prices finished at 66,880 yuan/mt overnight, down 0.33%. Trading volume was 47,000 lots, and open interest stood at 181,000 lots.

In terms of fundamentals, downstream stockpiling strengthened as the Labour Day holidays neared, bolstering spot quotes. However, the import window is about to open recently, and the market is worried that the increase in the supply of imported goods will restrain the increase in spot quotes. In terms of consumption, some downstream companies were actively purchasing while copper prices were falling, and demand is expected to pick up slightly in the near term. In terms of prices, the weakening of the US dollar has given copper prices a chance to rebound, but the market is still worried about demand and is still cautious before the Fed's interest rate hike meeting. It is expected that copper prices will hardly recover significantly in the short term.

Aluminium: After opening at 18,690 yuan/mt at yesterday’s night session, the most-traded SHFE 2306 aluminium contract rose initially to 18,720 yuan/mt, but then fell back to 18,605 yuan/mt before closing at 18,620 yuan/mt, down 70 yuan/mt or 0.37%. LME aluminium opened at $2,332/mt on Wednesday and closed at $2,331/mt, down 0.04%.

On the macro level, the market generally expects the Fed to raise interest rates by 25 basis points in May, and there are renewed concerns about economic recession. On the fundamentals, April is still the peak season for downstream consumption, and the domestic aluminium ingot social inventory remains in a destocking state. Although the aluminium price has dropped below 19,000 yuan/mt, high prices still deterred buyers. Downstream buyers have not shown a strong willingness to stock before the upcoming Labour Day holiday. And risk aversion may emerge before the holiday. As such, SHFE aluminium is likely to move rangebound. It is necessary to continue to pay attention to whether smelters in Yunnan will curtail capacity.

Lead: Overnight, LME lead prices opened at $2,116/m and once fell to $2,093.5/mt amid the banking crisis, but then rebounded and finally closed at $2116.5/mt amid the falling US dollar index, a decrease of 0.05%.

The most-traded SHFE 2306 lead contract prices opened at 15,290 yuan/mt and once rose to 15,300 yuan/mt amid the falling inventory and the expectations for supply increase, then fluctuated around 15,280 yuanmt and finally closed at 15,280 yua/mt, a decrease of 0.03%. The open interest reached 65,575 lots, a decrease of 1,485 lots from the previous trading day.

Zinc: Overnight, LME zinc closed at $2,648.5/mt, up $47.5/mt or 1.83%. The LME zinc inventory remained the same.

The most-traded SHFE zinc contract settled at 21,340 yuan/mt, up 80 yuan/mt or 0.38%.

In general, zinc prices will remain rangebound with constrained risk appetite.

Tin: SHFE 2305 tin contract prices rose sharply to 211,460 yuan/mt after opening and finally closed at 208,790 yuan/mt, up 0.9%.

In terms of spot market transactions, the discounts of small and medium-sized brands in the trade market narrowed slightly to around 800 yuan/mt, while most of the deliverable brands quoted flat, hence the overall discounts narrowed slightly. However, according to the feedback from trading companies, the shipments of some traders increased as SHFE tin prices fell sharply, but most traders still reported poor shipments. As SHFE tin prices gradually rebounded, the market demand gradually weakened and most smelters reported poor transactions. On the whole, downstream enterprises purchased as needed on dips.

Nickel: Yesterday, the spot premiums of pure nickel continued to decline, slightly encouraging downstream purchases. NPI market supply was not high, weakening the traders’ willingness to ship. The invisible inventory of NPI is still expected to be released to the market.

On the demand side, according to SMM research, the stainless steel futures prices remained firm yesterday, while the spot prices fell slightly in the early trading, which failed to boost the transactions as the downstream companies held a wait-and-see sentiment near the Labour Day holiday. The downstream sectors are less willing to restock. Nickel prices are likely to gain weaker support from supply tightness.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]